You can’t wait to be a new home owner. You completed your mortgage application, but you’ve found out it has been rejected. Don’t worry about it! According to the Federal Reserve, 25% of people who apply for home loans are turned down.

While it can be disappointing to learn that your home loan application was denied, you do have a right to know why you were rejected. In fact, your lender is required by law to supply you with a denial letter if your application was rejected. The letter will outline the reasons why your loan was turned down. Once you know the reasons for your denial, you can take steps to improve your chances of getting your mortgage application approved the next time.

Some common reasons for mortgage loan rejections and solutions you could make include:

1. Your credit score is too low. Find out which credit bureau provided the information that the lender based its decision. Get credit reports from that credit reporting agency and the other major credit bureaus – Equifax, Experian and TransUnion. Fix any errors on your reports. If the information is correct, take a year or two to work on improving your credit score.
2. Your employment history isn’t stable. Maintain steady employment – stay in your job for at least two years. Don’t bounce from one job to another in a short timeframe.
3. Your income is too low for the loan size you want. Consider buying a home at a lower price. Have someone with solid credit co-sign your loan.
4. Your application lists inconsistencies. For example, the income you listed doesn’t match what your employer provided. Make sure you complete any loan applications accurately and completely.
5. The appraised value of the property is lower than the loan size you’re requesting. Be glad you didn’t overpay on the home and walk away. Or, renegotiate for a lower sales price on the home.
6. You’re taking on too much debt with a new home loan. Pay off some or all of your existing debt before you reapply for a new loan. Try to live below your means. Get another job to bring in more money.

If you’re still not sure why your mortgage application was denied, ask your lender to explain it to you.

Always work with an experienced mortgage specialist like those at Grandview Lending in Indianapolis. A good mortgage specialist can help you determine what mortgage options would work best for your individual situation. Plus they can answer any questions you may have along the way. Call Grandview Lending at 866.690.4920 to get your free mortgage quote today.

Photo credit: iStockphoto/Chris Dorney